The nonlinear impacts of aging labor and government health expenditures on productivity in ASEAN+3 economies

Abstract

The aging of the workforce has become a paramount concern for ASEAN+3’s productivity. In response, government health expenditure emerges as a potential solution. However, the existing literature has generated inconclusive results and has yet to reveal the mechanisms and potential nonlinear effects of these factors on productivity. This study addresses this gap by examining the impact of changes in the proportion of the working-age population and government health expenditures on productivity growth, using data from ASEAN+3 countries over the period 2008–2009. Employing a robust methodology, we utilize several panel threshold regression models to derive statistically sound inferences and consistent parameter estimates. Our investigation reveals that government health expenditure effectively enhances productivity when the old labor force participation rate is below 51.352%. However, this effect loses significance at higher levels of the aging workers’ proportion. Additionally, we identify an optimal government health expenditure range of 1.906% to 2.859% of GDP, signifying a positive correlation with labor productivity growth.